8 Tips for Finding the Best Business Broker
Selling a small business for a high price usually is the result of years of dedication and persistence and a dream for many entrepreneurs. However, finding buyers for your business can be difficult if you aren't in a hot industry or lack unsolicited offers. An option to gain access to a larger pool of buyers and a structured selling process is to consider a business broker, which is similar to a real estate agent.
Business brokers provide the match-making service of bringing together buyers and sellers. The right broker can help your small business to fetch the best possible price in a sale.
Finding a Business Broker in 8 Steps
If you aren't already working with a business broker, identifying the best person for your sale requires doing some research and familiarizing yourself with the process. Good brokers help small businesses find sources for potential buyers and navigate other complexities involved with sales.
Working with your team of professional advisers and following eight key steps is a good start to connecting with the right broker and getting the most out of your business sale.
- Get referrals: If possible, always start with a referral from a trusted source. Ask your accountant, lawyer, peers, and industry association for names of good business brokers.
- Use IBBA: The International Business Brokers Association is a nonprofit trade association that offers education, networking, and professional training through conferences and otherwise. It's also a good resource for finding brokers who are in your area and familiar with your type of business. IBBA works with more than 1,000 business intermediaries around the world.
- Do due diligence: Just as a prospective buyer of your company will exercise due diligence, so should you. Examine your broker's background, experience, and credentials. Are there any lawsuits or complaints against them? Check the Better Business Bureau. Investigate their references. Have they handled sales of your type of business before?
- Find a dedicated practitioner: A business broker who spends all of their time selling businesses will add more value to your sales transaction than a part-time agent. A full-time business broker brings in a network of contacts and typically has a fuller understanding of the principles of business valuation. Find someone who is dedicated to the profession. If your company may be worth millions, consider merger and acquisition intermediaries. IBBA's code of ethics is a useful reference tool to use during your search.
- Keep it a secret: Avoid losing key staff and suppliers by telling them your business is for sale. It should be a highly confidential matter. Your business broker should ensure all safeguards are in place to protect your company. One premature word to your suppliers, employees, or customers that you are selling the company can have repercussions on your business operations and any potential sales.
- Deliver a marketing plan: Selling your business is all about marketing. Properly positioning the sale of your company to attract and motivate as many buyers as possible should be your goal. Ensure your business broker has a marketing plan including details of advertising strategies to attract a wide range of potential buyer leads.
- Avoid large upfront fees: A business broker fee ranges from 10% to 15% commission of the sale price of your company. Avoid any broker asking for a large upfront fee to assess your business value or start an application process.
- Avoid the pressure: Never allow your business broker to put you in a pressure situation. Do not make a rash decision. The selling of your company is a complex transaction, personally and professionally. Take the time to learn and clarify all uncertainties.